Hello, just clarifying a couple things before tax season.
- We can deduct 15% of the gross royalties paid as depletion every year as long as wells are producing? Can all royalties be lumped together in one deduction on Schedule E or should they be separated by lease?
2. Bonuses are considered “rent”, not royalty on schedule E?
Thank you for any help on this.
I’m not one of the elders, what’s bonuses?
Royalties can be combined on Schedule E. Some filers separate by state for easier reporting on different state returns. Be sure to deduct severance tax and other cost deductions on the checks. You can also deduct other direct expenses such as property taxes on wells and legal fees such as for reviewing the oil and gas leases. Lease bonus is reported on rent line because it is not subject to depletion.